Why tenants could face higher rents after the Budget

The 2025 Budget has set the stage for major changes in the private rental sector, with new tax rises on landlords expected to filter directly through to tenants. Analysts warn that the typical renter may see monthly housing costs rise by around £120 as property owners attempt to offset the additional tax burden introduced by the Chancellor. The reforms arrive at a moment when many households are already struggling with rising living expenses and limited housing availability.

At the centre of the concern is the government’s decision to increase taxes on rental income. The Budget raises the rate applied to property earnings, meaning landlords will pay more on the income they generate from letting out homes. For many, particularly smaller landlords, the increase puts further pressure on profit margins already squeezed by higher mortgage costs, insurance premiums and maintenance expenses. The likelihood of passing these added costs to tenants is a major worry for the sector.

As landlords respond to the tighter tax environment, rent increases are expected to become more common across the private rental market. Tenant advocates warn that renters have limited power to negotiate, especially in high-demand areas where available properties are scarce. With competition remaining intense in major towns and cities, many households may find themselves forced to accept higher monthly payments in order to secure a home.

Experts also warn that the cumulative impact of recent economic pressures leaves landlords with fewer alternatives. Rising interest rates have pushed up mortgage repayments, regulatory changes have added to compliance costs, and inflation has increased routine expenses. The new tax rises add yet another layer to these challenges, making rent increases a predictable consequence for many property owners seeking to maintain viability.

Some landlords may opt to exit the market altogether, selling their properties rather than absorbing the extra financial strain. A reduction in the number of available rental homes could place additional upward pressure on rent prices, particularly in regions where supply is already limited. Analysts suggest that this shrinkage in housing stock could intensify competition among renters and prolong affordability issues.

The government has defended the measures as part of its broader fiscal plan, arguing that the changes ensure a fairer contribution from those earning income through property. Ministers have emphasised that the reforms form part of a balanced strategy aimed at stabilising public finances. However, they acknowledge that the rental market remains under strain and that the effects of the Budget will require monitoring.

For tenants, the consequences will vary depending on local conditions. In areas with tight supply and strong demand, rent increases may be more pronounced. Other regions with more balanced markets may see smaller adjustments. Nevertheless, the general trend is expected to point upwards, with many renters facing steeper monthly payments as the measures take effect.

Housing organisations have called on the government to take steps to protect tenants from sharp increases. They argue that without further support, the reforms could exacerbate the challenges faced by low- and middle-income households. Suggestions include expanding tenant assistance programmes, accelerating plans for social housing, and introducing incentives for landlords to keep rents affordable.

Despite the concerns, broader measures within the Budget are intended to ease some cost-of-living pressures. Changes to energy levies are forecast to reduce average household bills next year, providing some relief even as housing costs rise. The removal of the two-child benefit cap is also expected to offer additional support to affected families.

The coming months will reveal the extent to which landlords adjust their pricing strategies in response to the new tax regime. Tenants will be monitoring the situation closely as they navigate an increasingly competitive market. With economic conditions still uncertain, the trajectory of rental prices will be a key factor shaping the year ahead for millions of households.